r/technology • u/Sea_Guava6513 • Jan 29 '23
What's Driving the Mass Layoffs in Big Tech Right Now? Business
https://www.gizmodo.com.au/2023/01/whats-driving-the-mass-layoffs-in-big-tech-right-now/331
u/NorwalkRay Jan 29 '23
These companies, along with others have enjoyed low interest rates and fast growth for a long time, making the stock prices soar and attracting talent for miles.
This transitioned into a period of massive hiring during COVID, based on expectations of increased growth driven by more online activity from people staying at home and that activity persisting at a high level after COVID from a new normal, that involves significant remote work.
That demand has not materialized nearly to the same degree as these companies had expected, and the result is that they have overhired, made some poor investments (easier to do when money grows on trees), and are seeing their stock prices battered.
As a result, these technology companies are divesting in areas to cut costs, normalize their resources towards the strategic investments they want to make, and improve their margin profiles.
Big tech companies are not only laying off workers, but also cutting costs by re-negotiating vendor contracts, choosing not to renew many, etc. This, in turn leads to those technology companies selling to the bigger technology companies to lay people off, creating a cycle of unemployment that is just beginning to accelerate (reminder: we are around 3.5% unemployment, amongst the lowest we've ever seen).
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u/EasternAssistance185 Jan 29 '23
Funny they hedged their bets on a new normal of WFH then every giant tech company threw a very public fit when no one wanted to come back to the office. Then they pushed VERY hard to destroy WFH culture with tons of ridiculous articles despite research stating that more work actually gets done and people are generally happier and more productive when they WFH. If they would’ve leaned into it, they could’ve been the shining example for every other industry to follow, but they’re fucking that up, and for what?
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u/xeromage Jan 29 '23
Isn't it?
"Everyone is going to be working from home after this... we're going to need a lot more people! No, the people we're hiring can't work from home!"
Fucking what? I meant the shortsightedness doesn't really surprise me, but it does feel like the people making these calls checked their investment portfolios somewhere in the middle and went "Oh fuck, a big chunk of my money is tied up in commercial real estate!"
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u/pencilsmasher Jan 30 '23
This is the answer. Most people would rather buy into conspiracies but it’s macro economics. They are transitioning from an era of cheap money and being rewarded for growth to expensive money and being rewarded for profit.
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u/EagleForty Jan 30 '23
You're right. I work in tech and talk to VCs every week. With unlimited free money, every company bet on exponential growth and massive financial losses. With the hope that their revenue would catch up to their spending.
Now that interest rates have risen and the VCs are tightening their belts, the gravy train is over. They need to become profitable now or sell out to another company before the cash runs out.
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u/djphan2525 Jan 29 '23
most of these layoffs.. as well as elsewhere not just tech... is mostly about cutting the fat... if people aren't buying or consuming things as much as they used to during the pandemic.. then there's just no need for this extra headcount who is not contributing to the bottom line...
in other words it's a normal business cycle... it'll get worse if consumers don't consume more or it could get better if consumers continue buying things... we haven't had a true recession since ... 2008... these things used to happen about every 5 years... there's a couple generations in the workforce who have no idea what layoffs look like...
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u/exoplanetlove Jan 30 '23
Cutting the fat my ass. These were just idiotic moves.
I work for the digital side of a business Ivy League and I saw a spurt of hiring that made 0 sense compared to the reality of opening back up and the realities of inflation. I've been calling these layoffs since like Summer of last year because of that.
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u/Fred_Sav4ge Jan 29 '23
Over-hiring in 2021 and skyrocketing interest rates
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u/mrtwr18 Jan 29 '23
There's a remarkable lack of mention of the rising interest rates in this thread.
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u/Ialwayslie008 Jan 30 '23
The company I work for laid off maybe 2,000 people, but they also hired about 4,000 at the same time. It's more about restructuring and getting rid of failing business segments, so the business can use that money to invest in what IS working and profitable.
This ties into your mention of interest rates interest rates, because if borrowing money is dirt cheap, they're more likely to take a chance and invest on a riskier project, when money is expensive, everyone tightens up and takes less chances. Much safer to invest in current profitable markets, than try to enter a new region.
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u/norithofthenorth
Jan 29 '23
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Conspiracy time:
All these companies have been trying to get workers to return to office since 2021 (when COVID-19 variants derailed those plans).
They’re all sitting on top of massive real estate portfolios and capex costs that they can’t quickly offload (think Amazon owning like 25% of Seattle commercial real estate).
Knowledge workers have pretty much refused to go back to the office without concessions to at least part time wfh, and the real estate these companies sit on is becoming less valuable without their workers juicing the local economies to drive all prices up - including their own real estate.
I mean DT SF is basically a ghost town of what it once was for tech workers. Seattle is also a shadow. NY is prob 75% of what it once was. So many businesses have closed that relied on massive influx of knowledge workers in cities. But since COVID, no one wants to live in these cities anymore and thus these real estate portfolios are significantly less valuable and difficult to offload.
“Hey what if we laid off 5-8% of workers, blamed it on ‘the economy’ and then made everyone left fear for their job and do whatever we say like come back to work because ‘the economy’ is going to be bad and they don’t want to lose their job in the ‘next round of cuts’”
The cynicism here is pretty high I admit, but this whole thing feels like a power move to:
A.) control over their corporate workforce (reduce attrition and keep uppity employees in line)
B.) increase the dwindling value of their real estate portfolios by forcing workers back to office under an ambiguous fear of ‘further layoffs’ and ‘oh no economy bad everyone brace yourself!’. (Watch - the second they force everyone back to the office and their RE goes up again their gonna sell as much as they can.)
C.) generate a favorable political environment for more business-friendly politicians to be elected - who will repeal the corporate minimum tax that all of the sudden they all have to pay thanks to IRA. (‘Oh we’re a big tech company and have to lay all these people off bc of the eCoNoMy…’ and dems get blamed if there is a recession and republicans are elected and pass looser tax policies to ‘stimulate the economy’ and these tech companies win.)
Anyways it’s early and my brain isn’t fully awake but this is my conspiracy. Thank you for coming to the convention.
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u/K1nd4Weird Jan 29 '23
Fuck it. I subscribe to this conspiracy theory.
Makes just enough sense, if you don't think too long on it. Uses my bias against corporate bullshit.
Son of a bitch I'm in.
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u/thetasigma_1355 Jan 29 '23
Like all decent conspiracy theories there’s some truth to it. Companies are concerned about their real estate investments and even more concerned about the increased fluidity in employment options for workers.
Local governments are even more concerned than the businesses. The businesses can move. Local governments can’t. Local governments already have businesses sweetheart deals in order to have the workers in the city which drives local businesses.
While I’m a strong supporter of WFH, and do so myself 100% of the time, I also have serious concerns on how our large cities are going to survive. As much as it’s nice to say “not my problem”, it’s small businesses that are being decimated and everybody will feel the impact in some way if city center areas collapse. Just look at some of the rougher cities like Detroit to see what happens when the city fails.
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Jan 29 '23
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u/BigMax Jan 29 '23
Yes, it's greed, and also with everyone doing it, you get the positive effects on the bottom line (at least in the short term) and none of the negative effects that might come from being the only one having layoffs.
If it's just you laying off, they think "that company is in trouble" and that can be bad. If everyone is doing it, it's just the industry having adjustments, all is well!
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u/walkslikeaduck08 Jan 29 '23
Yep. It’s investor greed. It’s ironic that a lot of these investment funds are fueled by public and private pensions looking for a high return.
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u/norithofthenorth Jan 29 '23
You’re assuming these activist investors and rich ass owners aren’t all talking at the country club on the weekends.
These people all play a public game, but the private game is real and these folks aren’t dumb.
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u/Asleep_Emphasis69 Jan 29 '23
Or, the FAANG companies over-hired during a near 0% interest period. To curb inflation the Fed has been raising rates and this has significant effects on these businesses. So, now that their jumbo loans have higher rates and economic outlook is dimming, time to trim the fat.
It's no surprise to me that Bezos, Hastings, Schultz, Bret Taylor, Butterfield, etc. stepped down while their stocks were at ATH's and it's not because they were exhausted....they just didn't like making the unpopular decisions.
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u/nosayso Jan 29 '23
Yeah it's not necessary to create a whole conspiracy when there's a pretty obvious macroeconomic culprit in interest rates.
Any investments that weren't quite yielding what you hope become riskier when the cost of borrowing increases. Amazon said pretty explicitly they were disappointed with Alexa and laid some people off in that division, for example.
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u/pixel_of_moral_decay Jan 29 '23 edited Jan 29 '23
That’s part of it, but there’s another part:
A large chunk of outstanding stock for these companies are owned by pension funds. A small number of fund managers oversee an insane amount of money.
Those same pension funds are heavily invested in real estate owning portfolios of buildings especially commercial office space. This funds many peoples retirements.
All of this is hosed if office space loses value and these funds are destroyed.
Big investors like this have the CEO’s ear. They aren’t happy unless companies are helping to prop up these investments.
This is absolutely about real estate. And pensions.
There’s an added bonus that flooding the market with labor drives down wages which is obviously also good for investors. Tech wages have been higher than inflation. This will bring them down more in line with the rest of the economy. There’s now lots of qualified folks applying to every job.
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u/Rolandersec Jan 29 '23 edited Jan 29 '23
I work in tech. Before the pandemic I had a 9x10 office with a desk, my stuff, and a small sit down meeting area that might have had a small bar in the corner. When we went to WFH I updated my home office space and it’s really nice. Now they want us to come in to the office and we are restricted to cubicles only. Of course many of the people I work with are all over the world, so why do I want to drive into to work where there’s a worse working space, have to pack a lunch and then spend all my time in virtual meetings. I actually prefer to go into the office but there’s not a lot of value there.
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u/eist5579 Jan 29 '23
Commuting in for virtual meetings. 100% pointless.
Although, my commute used to be bicycle and gave me an excuse to get off my ass. So, we moved to a lower COL, bought a beautiful house and a peloton. =P
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u/BonesAO Jan 29 '23
the real estate these companies sit on is becoming less valuable without their workers juicing the local economies to drive all prices up - including their own real estate.
I mean DT SF is basically a ghost town of what it once was for tech workers. Seattle is also a shadow. NY is prob 75% of what it once was. So many businesses have closed that relied on massive influx of knowledge workers in cities. But since COVID, no one wants to live in these cities anymore and thus these real estate portfolios are significantly less valuable and difficult to offload.
perfectly put. Reddit should have community-driven highlights of replies.
love the conspiracy, I am in. Where can I get a robe?
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u/Whiskeypants17 Jan 29 '23
Nobody wants to live there, or nobody can afford to? My bet is they are hoping for a government handout to get affordable housing back into cities after the capitalists absolutely raped and pillaged the market.
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u/BonesAO Jan 29 '23
sounds like a good opportunity to bribe politicians for a stimulus package
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u/onomojo Jan 29 '23
Let's not forget these companies had been orchestrating an illegal anti poaching policy for quite a while in an effort to keep wages down. These types of things have happened recently and it's not a far reach to assume they will happen again in some form or another. My running conspiracy is this was orchestrated because wages were finally growing across the industry in the past year.
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u/AdLess636 Jan 29 '23
One issue with this for me. A ton of no brick/mortar companies have launched in the last 3 years. The companies trying to manipulate the work force would just hurt their long term ability to hire “talent”. They might be able to find people, but not top tier talent. Top talent knows better. (Source 15+ years head hunting)
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u/CaptainWart Jan 29 '23
I think you're spot on. The real estate stuff and desire to exert control and micromanage is a pretty open secret. Couple that with Wall Street greed and the need to pacify shareholders by making cuts just for the sake of making cuts, and it's pretty grim.
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u/kriegs Jan 29 '23
I'll add a little more conspiracy to this already great one: the great resignation period where the tables started to turn a bit a bit in favor of the workers spooked c-level/ investors. So turn around and make workers fear for their job swings power back.
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u/cbartholomew Jan 29 '23
The fucked up part about this is that it’s so simple - and usually the most correct conspiracy’s are the most simplest ones.
Except flat earth - earth isn’t flat you crazies
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u/nmarshall23 Jan 29 '23
Here is my favorite take down of flat earth. It's a telescope mount that tracks the sky. So you can get long exposure photos. How it works only makes sense if we live on a globe.
In general if a conspiracy theory takes over people's lives, and pushes those who question it away, it's a toxic community.
The documentary In Search of a Flat Earth, talks about this in more detail.
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u/Retlawst Jan 29 '23
A true Flat Earth conspiracy would be ridiculously complex when you consider how long we’ve known the world was round.
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u/kitten_potato Jan 29 '23
I work in software and I believe this 100%. They decided they need to show us who's boss as it were because we collectively thumbed our noses at returning to office. My husband's company, a major game dev literally canceled their return to office plan along with plans to build a new campus
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u/kitten_potato Jan 29 '23
My company, in contrast, was fully distributed before and we just had a record breaking year. We're scooping people up like nuts. Will be interesting to see this play out
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u/xeromage Jan 29 '23
This is the side I like to hear. All these fucking middle-management dinosaurs trying to throw their weight around... are going to lose to more flexible, adaptable animals.
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u/la-fours Jan 29 '23
The real estate aspect gets parroted often here on Reddit but as far as I know most of these buildings aren’t “owned” but leased by many firms and managed by outside companies. Less real estate to manage actually helps the balance sheet at many firms. I say many - not all.
Tech firms are just displaying their overwhelming preference for short term stock performance over anything else. It doesn’t have to be a conspiracy - to me this just screams of knee jerk reactions to a stock market that has cooled after many many years of unreasonable gains and stupidly high valuations.
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u/DrJongyBrogan Jan 29 '23
Eh, I don’t buy it. I work at one of these companies who laid off 10% of their workforce and they also actively downsized their real estate portfolio.
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u/EasternAssistance185 Jan 29 '23
I’ve been thinking something along these lines too. I get people saying that the companies are readjusting, but I also don’t see what they’re readjusting to… they’re still clearing record profits. The only thing I’m thinking is, they’re paying too much for wages to continue growth, so they’re leveraging their power to destroy the job market so they can get cheaper labor.
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u/Low_Outlandishness15 Jan 29 '23
Politicians don’t want remote work to spread wealth across the country because that homogenizes the voter segments. The wealthy educated folks on the coasts and the rest of the country feeling fomo helps politicians create hate. But if techies are spread across the country, they’re harder to demonize, and poor cant be kept poor and hateful. Also population getting mixed up means you can’t predict who will vote red or blue, both parties want their constituencies locked in, or gerrymandering won’t work
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u/cusmilie Jan 29 '23 edited Jan 29 '23
Full disclosure - we live in Seattle suburb and husband works for Amazon. If Amazon required workers to return to the office, I would anticipate a lot of workers either trying to leave for other tech companies or switch gears and work for a non-tech company. Housing costs are out of control so that severely impacts the number of people willing to relocate to Seattle. Even if you wanted to move to the area, you would have a hard time affording it now, especially with a family. For the past year, teams could not hire anyone new unless it was virtual. That was a dealbreaker for at least 90% of applicants, even those transferring from within the company.
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u/cbartholomew Jan 29 '23
I have a house in Seattle but was asked to move to California. I have children and the housing costs are 3x the prices in CA.
It was cheaper for me to fly back and forth weekly to California, have a shit studio, and not change a thing then up rooting and paying a California mortgage.
Honestly - I can’t believe it has gotten this crazy. This is like the new normal.
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u/OrionSuperman Jan 29 '23
husband works for husband.
Hah, thanks for the laugh. :)
And I actually moved away from Seattle for that reason. I got a 3600 sq ft house on a half acre 30 min from downtown Minneapolis for 400k. Same house/distance from downtown Seattle would be 3x as much at least. Originally moved pre-Covid and worked in office, but now am fully remote.
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u/Whitino Jan 29 '23
I'm not informed enough to comment on your points B and C, but I do believe strongly in point A.
My wife and I were talking about this since the start of the mass layoffs, and we were both convinced that this was exactly that--a power move to whip all the tech workers back into line, and get them back to working in the office. Because it just seems strange that the only industry/profession seeing these mass layoffs is precisely the tech-related ones who were exerting pressure on bosses/management to continue working from home.
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u/Pull-Mai-Fingr Jan 29 '23
Yeah I think this is a big part of it too. Employers do NOT like the shift of power from the last couple years and now they are trying to rebalance it in their favor. The interesting thing is for the jobs I am searching for, at least, the pay seems to be a little better now than it was six months ago. Granted, that comes with “hybrid” strings attached…
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u/closethegatealittle Jan 29 '23
The company I work for is now tracking badge in and badge out times for office workers. If you were not there 8+ hours a day 3x a week last year, you don't get a raise this year. The company is creating an extremely toxic, fear driven culture throughout and I'm not here for it. I've already noticed it starting to frazzle people.
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u/cheesefromsalami Jan 29 '23
Flooding the market of people looking for work drives down salaries.
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u/WISCOrear Jan 30 '23
God forbid the work force makes ANY gains against corporations. Nope, gotta keep driving salaries down and take back the overwhelming & insurmountable amount of power over regular people.
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u/Cainga Jan 29 '23
One of the problems with mega companies. An individual isn’t supposed to be able to effect the market but these companies are large enough to disrupt it. Just layoff your most overpaid workers every couple years and replace them with cheap fresh graduates.
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u/t0slink Jan 30 '23
To be fair, these mega companies are the reasons the pay became so high to begin with. Only big tech can afford to pay workers this well.
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u/JRS_Lanc Jan 29 '23
The company I work for is a large supplier to almost all of the big tech companies. We are seeing a pretty big downturn in the market and easing on investment. Thus we have also began doing layoffs, just very quietly. Bookings and Billigs are all down from last year.
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u/Sea_Guava6513 Jan 29 '23
*so market correction from Covid?
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u/CraigJBurton Jan 29 '23
Over promising from CEOs that will never feel the impact of their poor planning.
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u/Buttafuoco Jan 29 '23
“I take full responsibility”
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u/bcrosby51 Jan 30 '23
"I'll take, something a CEO would never say for $500"
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u/Buttafuoco Jan 30 '23
The irony is that is the opening of every one of their emails during a layoff… it means nothing
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u/set-271 Jan 29 '23
What most dont realize, is that this was the first wave. More lay offs to come every quarter. Strap in!
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u/GYN-k4H-Q3z-75B Jan 30 '23
Agreed. This was just the first round.
But what most people also forget is how many people they hired since the pandemic.
Microsoft firing 10000 people is a "mass layoff". Microsoft growing from 144000 people in 2019 to 222000 people in 2022 wasn't reported as an insane hiring spree.
They can fire all those people and still have tens of thousands more than a year ago.
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u/JJ4prez Jan 29 '23
Hired too many people to keep up with COVID tech boom.
COVID boom settles, tech stocks drop, recession looms, get rid of people to make shareholders happy.
People's salary and benefits are like the #1 most expensive thing for a company and the easiest to alleviate when needed.
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u/Hmm_would_bang Jan 29 '23
I work at a startup that raised its series A in summer 2021. So pretty early stage.
I’d say this problem also hit in our world with the VC funding boom, people with the cash to do so we’re throwing it into speculative high growth areas
A lot of our competitors expanded very rapidly in 2020 and 2021. We did not use our funding to scale up headcount, which at the time was frustrating, but holy shit is it paying off
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u/jhachko Jan 29 '23
Exactly this. Companies often hire in anticipation of future growth and profit, and layoff when the trend doesn't look like it will pan out. A retail store hires up for Q4 shopping season because there is more expected sales, and then let's go, or allows employees to leave via attrition without rehiring. This is how business works, not the malicious narrative being constantly spun up by the boo birds of Reddit. There has to be some level of efficiency or the company will crater itself. Down vote away.
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u/BonesAO Jan 29 '23
I mean both things can be true at the same time. Regardless of being an expectable outcome of how they operate for market anticipation/optimization, it is also true that there is huge pression from stakeholders to do anything that may rise the stock prices (even if by mere speculation... case in point the BuzzFeed announcement of using GPT3 to create content). And sometimes announcements of cost-saving measures indeed do
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u/Ethiconjnj Jan 29 '23
All these people want to do is believe every decision is made by a moronic CEO to please share holders.
Seriously look at the comment sections of these tech layoff articles, it’s the same fucking comment over and over.
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u/JJ4prez Jan 29 '23
I mean, I was in the oil and gas industry for 10 years, we saw like 3-4 different waves of similar boom and recession for the industry. People got laid off each time. Its really not that complicated. I just think it's a fairly "new" thing for the modern tech industry.
There will always be ebs and flows.
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u/squirrelchips Jan 29 '23
“We have made record profits but can’t afford the workers we have!”
It just doesn’t feel right to be boating about how good your business is doing while laying people off all over the place.
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u/JohnSquiggleton Jan 29 '23
This is the MOST correct answer. I think that /u/norithofthenorth and /u/bats131 's comments both play a big part. Obviously shareprices are a big factor and there is legitamacy to company's trying to put the remote work "genie back in the bottle". But the massive tech boom that was created when SAAS programs had to focus on building features to support remote calibration was huge. Largely, much of that work is done and when the shares dipped, the leaders said "okay bye".
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u/bigwig8006 Jan 29 '23
It would be more believeable if the people making the decisions saw a decline in compensation, right? We can't act like it is smart business, when thr smart people running it make poor costly decisions and do not suffer any consequences.
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u/BigMax Jan 29 '23
I think a lot of it is just copycat layoffs while there's reasonable cover for your actions.
Every huge company has groups, divisions that aren't performing perfectly in any given moment. Normally a hugely profitable company will adjust, work on that division, or maybe slowly wind it down, rebalancing resources to other places.
But with "everyone" having layoffs now, anyone can just step up and say "let's cut all of division X and half of group Y" and then go from there. If they were the only ones doing it, it would look bad, people would wonder what is wrong with the company, and other potential employees would hesitate to apply there. But when everyone is doing it, there aren't the normal negative repercussions.
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u/IrishRogue3 Jan 29 '23
Over hiring during pandemic coupled with back to office and inflation
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u/Dontlookimnaked Jan 29 '23
Seems like a healthy mix of over-hiring from last year and some FUD for the upcoming year.
Trim the fat so to speak.
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u/Turbots Jan 29 '23
Its never a headline when they hire 100k people in a year. But its major clickbait time when they fire 10k the year after.
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u/SloppyMeathole Jan 29 '23
It's called right sizing your workforce after years of over hiring when the economy was hot. If you look at how many people these companies have hired over the last 3 years, most of them still have a net increase even after the layoffs. I think in the case of Microsoft they are still like 30,000 higher than what they had before the pandemic, even after the layoffs.
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u/Amity83 Jan 29 '23
This this is not complicated. Even in some cases where you see a big report about layoffs, the media conveniently leaves off the fact that sometimes the same company is hiring in other locations.
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u/kaplanfx Jan 29 '23
Why isn’t it the management that over hired getting laid off? They cost more than rank and file employees and they are apparently failing at their job so…?
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u/reconstruct94 Jan 30 '23
If I had to guess: corporate greed, executive bonuses and unrealistic shareholder expectations.
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u/atwegotsidetrekked Jan 29 '23
A bunch of rich people led by Jamie Dimon at Davos decided that this was better for their whole portfolio.
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u/RagnarHedin Jan 29 '23
Zorg heard the economy was heating up so he fired a million taxi drivers.
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u/jeffend1981 Jan 29 '23 edited Jan 29 '23
This is simply companies now normalizing after the pandemic hiring party in 2021.
Nothing to see here.
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u/DisillusionedBook Jan 29 '23
They hired too many people in the boom, the pandemic slammed on the worldwide economy brakes, AI and automation being implemented to provide opportunities to reduce staff, also more profit for the few.
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u/Sad-Corner-9972 Jan 29 '23
They overhired during the pandemic. That and the insatiable greed of the top players.
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u/spin_kick Jan 29 '23
Tons of fluff during the good times. You just needed warm bodies in some roles to handle all the extra business.
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u/B0BsLawBlog Jan 29 '23
If you cut when everyone is hiring you might lose a lot of good people who won't wait to see what happens to them.
But if everyone is cutting you can do a clean up with less talent loss.
Most these companies grew by more than the cuts over recent years, sometimes by multiples of the cuts, this just seems like an opportunistic reorg cycle.
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u/Comprehensive-Sun-78 Jan 29 '23
Besides keeping investors happy, there are many other reasons or bonus effects. One seems to be the intention of weakening or why not even give a fatal blow to the remote working concept and the power the employees in certain sectors accumulated. It's a complex equation to solve but the shortage of skilled people that will continue to increase will probably maintain the job candidates in a better negotiation position. And if you ask, how about the thousands of skilled workers laid off recently? I believe 90% are not that skilled so it shouldn't have too much impact. A lot of them were hired because those companies had too much money.
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u/Dreaminginslowmotion Jan 29 '23
Why is Twitter listed at 4,000? The number is closer to 8,000 (I was part of those layoffs)
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u/PixelatedExistence Jan 29 '23
It's definitely corporate greed since they're laying ppl off instead of decreasing bonuses or lowering things from the top.
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u/Muted_Sorts Jan 29 '23
NDAs have people's mouths taped/welded shut. There's reasons, we just can't say, because CA and Washington State don't have sufficient protections for employees to speak the truth.
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u/0_Dopple_0 Jan 29 '23
Answer to this is dead simple. Capital is a expensive now and all companies from Unicorns to small Tech startups now need to demonstrate significant commercial value - I.e become profitable or else the market is going to smash valuations. That’s it. Previously all that shareholders were chasing was growth. This turned on a dime around May-July last year. Shareholders realising that a lot of their punts in tech companies with ridiculous revenue multiples were never going to deliver and therefore tech CEOs have to pivot to reducing costs because there’s no way in hell the rev numbers on their own would reach anywhere near Val multiples. I’m a CEO of a tech startup and have experienced this first hand. Luckily we’ve always focussed on revenue and turning profitable and our raises were never on outlandish. We saw the writing in the wall in early 2022 when were in market for a raise and right-sized then and there laying off about 30% of personnel. This will all change and hiring will start again if the shareholders shift their focus to growth again. Probably in about 2 -3 years depending on what happens in the capital markets.
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u/Dhrakyn Jan 29 '23
Ineffective middle management. These companies are all afraid to make decisions so they just do what the other is doing. Layofffs never benefit companies long term but although study after study proves this, these companies do not employ anyone with a spine to do something different. Don’t rock the boat and you might get promoted to senior director of nothing instead
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u/Changingchains Jan 29 '23
I would guess it is the use of more offshore workers and contractors. It’s happening in all industries, especially among those corporations with heavy private equity investments.
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u/Mediumcomputer Jan 30 '23
Probably the massive profits. Though not enough massive profits to buy back all the stock so they’ll cut labor costs and buy back more shares
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u/Sir-Lapo Jan 29 '23
I honestly think that these companies are starting to realize that half of the middle management positions are useless.
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u/Dic3dCarrots Jan 29 '23
The position is useful, good management would fix a lot of issues. The people filling those positions, however, are not reducing redundancy, coordinating department work with other departments, communicating needs up and down the pipeline, identifying priorities, or promoting an effective and healthy work culture.
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u/Sir-Lapo Jan 29 '23 edited Jan 29 '23
That's the thing. The issue is not the middle management itself, but how it’s implemented by the companies. I work from the outside with a lot of companies that have 10 people doing the job of 2, creating just chaos internally and externally. Most of these people are there just fighting each other trying to get a jump in their career with very little benefit for the company itself. I know that my experience is not representative of the general trend, but among my colleagues the sentiment is the same.
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u/loctarar Jan 29 '23
I've seen this happening when companies change priorities and project. You have project A and B. B gets deprioritized, A becomes critical. Let's just merge the teams from A and B so they can build the product faster. Yeeaaa right
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u/rayvin4000 Jan 29 '23
Working from home, in my opinion. Unfortunately part of it, is too many jobs were created out of thin air during the pandemic (businesses were basically paid to open up positions) and too many freedoms were given during the pandemic to workers that they don't want to give up. So they're basically eliminating these jobs and putting the fear of god back into workers. .
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u/Once_Wise Jan 29 '23
There was a tremendous hiring during the pandemic, when everyone was working from home and needing more computer hardware and services. Now that has changed, PC sales have plummeted and they are mostly just shedding some of the hires that took place during the pandemic.
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u/NikD4866 Jan 29 '23
Twitter started it. And then the rest said “wait, if they can do that and still operate, what the hell are WE doing??”
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u/geek_ironman Jan 29 '23
Personal tinfoil hat theory: they want to knock tech salaries down.
One of the few surviving middle classes in America is the tech/IT one: they have decent salaries and can switch jobs quite comfortably (if they're good, of course).
We all know that the elites want working classes to stay poor, cause if you have to worry about making ends meet you're surely not able to rebel in any way.
By massively laying off people they created an artificial surplus of workforce, that's gonna compete with itself for jobs, thus driving down the salaries.
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u/Mr_Makaveli_187 Jan 29 '23
Monkey see, monkey do. One tech company receives a temporary boost in their stock price, intellectually lazy CEOs follow suit.
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u/StuckAFtherInHisCap Jan 29 '23
Interest rates are coming up after being basically zero for years. That means it’s much more expensive to borrow money, so for unprofitable startup companies, the party is over. They can’t just keep borrowing now, they have to actually make money.
Also, big companies are generally herd animals because they want to put on the best show for investors. “Salesforce laid off 8%? Uhh maybe we should too.”
Companies wildly overhired over Covid. There was literally a war for talent, particularly software engineers and adjacent disciplines. There was a (silly) concern that Covid might last forever, employees were also quitting due to the Great Reaignation/burnout, and so companies hoarded staff.
Related: consumers aren’t behaving the way they did in 2020, 2021, and the early part of 2022. Notice how the layoffs are mostly effecting big tech companies? It’s partly because people aren’t sitting at home using their services / cloud networks / etc as much.
I do believe that “showing employees who’s boss” is a bonus here. The other commenter who mentioned empty company campuses and CEOs wanting people to start coming back had a point.
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u/natufian Jan 29 '23
Here's the TLDR
Many tech companies are funded through advertising. So, for as long as that income stream was healthy (which was especially the case in the years leading up to COVID), so was expenditure on staffing. As advertising revenue decreased last year – in part due to fears over a global recession triggered by the pandemic – it was inevitable layoffs would follow.
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u/Mobile_Shoe3347 Jan 29 '23
We need to get all the people from the layoffs and help them start their own tech company with equal pay from top to bottom. call it freedom tech and undercut everyone else imagine being part of a real movement away from pyramid structured companies.
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u/Vypernorad Jan 30 '23
I recall reading something from the head of the Federal reserve last year. I believe he was saying that companies would have to put the hurt on employees to slow inflation, and get them desperate enough to stop demanding higher wages and benefits. Pretty much, the working class was going to have to get fucked otherwise corporations and rich investors might have to settle for making a bit less money, and that is never an option. Seems to me like a solid contender for the reason behind mass layoffs.
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u/HalensVan Jan 30 '23
"Capital Discipline" lol
At least that's usually the excuse with companies basically just trying to maximize profits.
Used incorrect, correctly or ironically.
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u/WackyBones510 Jan 30 '23
They were staffed for an anticipation of growth that has been untenable with decreased investments with higher interest rates.
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u/xapxironchef Jan 30 '23
"Fear" Fear that wall Street is right. Fear that your massive, tax-avoiding entity is contributing to inflation when you pay people who sit at their keyboards all day managing your platform $1m plus. Fear that if you don't keep setting new records for corporate profits, your board will fire YOU instead of THEM. Fear that you can't afford that house in the Hamptons after all, because you employed too many "workers". Fear that it really IS their fault, not yours or the inverted-pyramid of management you have in your company.
Watch "The Fifth Element". The scene where Zorg fires a million employees? That's where we are right now.
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u/ArmsForPeace84 Jan 31 '23
A little from column A, a little from columns B-Z.
Some of these companies are panicking at the pace of AI development, and while they don't know yet how they want to use AI, or perhaps even what it is, they know it will be expensive to get into. Borrowing money isn't virtually free anymore, so they want to put some life back into their stock, and announce an offering at the market in the near future to raise funds.
Others have been eyeing a workforce reduction for some time, but feared the optics, and are now shedding positions because their own layoffs will be just one more headline in a sea of them.
Some of them were forced to admit to very painful failures chasing emerging trends, and found they can't mollify the activist hedges with talk any longer.
Others are eyeing an exit from labor markets where they're on the hook for substantially higher than market rate compensation to keep up with a stratospheric cost of living, or where they're facing additional regulatory burden and taxation for hiring teleworkers due to legislation passed or likely to pass in these States.
Some have been leaning so heavily on automation, right or wrong, for so long that users of their platforms speculate online about what someone with a badge to get into their ritzy corporate campus actually does all day.
Still others are deciding that their ideal balance of US-based remote and overseas remote labor involves fewer positions in the US.
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u/whatweshouldcallyou Jan 29 '23
Luckily this is just bad timing with companies having overhired and fear of a possible recession.
The tech job apocalypse (AI eats everyone's dinner) is like at least five years away. Maybe.
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u/Buntisteve Jan 29 '23
I work in logistics, for almost 10 years now, and ever since I was a junior, everyone was betting on self-driving trucks solving driver shortages in the next 5 years, well they are importing drivers from poorer countries instead.
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u/HomoMilkGuy Jan 29 '23
Extract all the work and profit from regular human beings. Then dump them in the trash.
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u/bats131 Jan 29 '23
Making shareholders and Wall Street happy.